Mr. Iyer is spending sleepless nights – not only because he has been detected with cancer, but because his medical insurance provider has informed him that his medical insurance will only cover the hospitalization expenses. It will not cover the rest of the treatment cost. Coupled with this, due to his ill health he is unable to run his business successfully which is affecting the family income as well. While his family is running from door to door, arranging for money, he secretly wishes that he had purchased a critical illness policy which would have not only covered the treatment cost, it would have also taken care of the financial loss due to illness.
Sounds familiar? We all know someone or the other who have been gone through this situation and we all know that we might be in this situation as well tomorrow. Isn’t it better to act now than be sorry later?
We know that most people don’t understand the difference between the two and why both health insurance and critical insurance cover is required in someone’s life. In this article, we will clear the confusion and explain both in a simpler way.
Health insurance is basically an all-inclusive plan which covers hospitalization expenses. Some health insurance policies provide additional features like maternity benefits, OPD cover, etc. In general, health insurance policies in India offer the following benefits:
In-patient hospitalization expenses
Pre & Post hospitalization
Day care treatment
Organ donor expenses
However, a point to remember is that the benefits may vary from one insurance provider to another.
Critical Illness Policy
A critical illness policy is an insurance policy which covers only life-threatening diseases which are listed by the insurance provider. The life-threatening diseases usually include diseases like cancer, kidney failure, multiple sclerosis, heart diseases, etc.
So what are the points of difference between the two? Let us see the differences on the basis of important aspects:
The nature of insurance: Health insurance typically is available for 1, 2 or 3 years and has to be renewed on completion of the policy tenure by paying a premium. Critical illness, on the other hand is a policy which is taken for a long period, usually 1 to 20 years.
Benefits: In the case of a health insurance plan, the insured is reimbursed for the expenses incurred due to hospitalization. This can be done in two ways. If the insurance provider has a tie up with the hospital, the cashless hospitalization can be availed by the insured. If the insurance provider does not have a tie up with the hospital, the insurance provider reimburses the policyholder upon submission of the hospital bills. Critical insurance policy, on the other hand, pays out a lump sum amount to the insured person upon diagnosis of the disease. The only condition is the disease has to be pre-specified in the list of critical illnesses covered.
In the case of critical illness policy, neither the hospitalization nor the submission of original bills is necessary. The best thing about critical illness policy is that the insured individual receives the payment at once and can spend the amount the way he likes. It is not essential to spend the money on treatment only.
Coverage: In terms of coverage, critical illness policy has a lesser scope than health insurance. A critical illness policy covers only the specified critical illnesses while a health insurance policy covers a wide range of diseases. Usually, the number of diseases ranges from 6 to 20 diseases that may differ depending on the insurer or the policy chosen. Critical illness policies also cover instances not covered under health insurance like a temporary loss of pay, travel, boarding, post-operative care, etc.
In a health insurance policy, hospitalization due to any cause is covered. Hence, if someone is injured in an accident, the health insurance policy comes in handy.
Waiting Period: Both types of policies have waiting periods. In the case of health insurance, the waiting period is usually 30 days from policy inception. Only hospitalization due to accidents is covered during this period. Pre-existing diseases are usually covered after 1 to 4 years of continuous coverage.
Critical insurance policies usually have a waiting period of 3 months. If the critical illness is diagnosed during this period, the same is not covered under the plan. Moreover, there is a survival period waiting clause where if the insured person expires within the specified survival period waiting limit which ranges from 28 to 30 days of diagnosis of the critical illness, the coverage amount is not provided. There are some critical illness insurance plans which offer zero day survival waiting period.
So, now let us come to the main point. Which is better for you – health insurance or a critical illness insurance?
Both the policies are different in nature and hence the one cannot replace the other. Ideally, you should have the right mix of both. While health insurance will take care of the hospital and medical bills, critical illness policy will cover the financial expenses that may incurred. Hence, having a right mix of both is essential to sailing through difficult times of life.
It is advisable to buy both the plans at the earliest age as the premium amount is also lower if bought at an early age. However, if you have already crossed the age of 30 – 35, we strongly recommend you to buy a critical illness and health insurance cover for yourself, if not yet bought. It will come in really handy during unforeseen circumstances.